VA Home Loans: Here’s What You Need To Know
If you’re an active member of the military or a veteran, then it’s definitely worth investigating taking out a VA home loan. In fact, we think it’s so important that we’ve done the leg-work for you! Aren’t we nice?
So, who can apply?
• People who have served or are on active duty in the United States Military
• Widows of service members, under certain conditions
• Reservists and National Guard members who meet certain prerequisites
You need to have completed one of the following:
• 90 consecutive days of active service during wartime
• 181 days of active service during peacetime
• 6 or more years of service in the Reserve or National Guard
You will need a certificate of eligibility. Most lenders have electronic access that will allow them to look this certificate up for you, so there’s no need to start rummaging through the paperwork just yet.
The basic entitlement is $36,000. Contrary to how it may seem though, this is not a reference to the maximum loan amount you will qualify for. In fact, all first-time users of VA home loan benefits start with enough entitlement for a mortgage of $417,000. (This figure can be higher in certain “high cost” areas)
Jumbo VA Loans
Not only is this a fun name, but it’s a great option if you want to go above the limit. You’ll automatically have to pay the closing fee, and a down payment, which will be 25% of the difference between the county limit and the total loan amount.
One of the best bits about a VA loan is that you don’t need to pay for PMI -or Private Mortgage Insurance. This is because the VA is guaranteeing the loan to the lender, and they trust them more than they do the Average Joe. Whatever the reason, it’s good news for you.
Types of VA Loans
There are five different types of VA loans, which are:
The Purchase Loan. This is the most popular and common loan. It helps homebuyers to get a competitive interest rate that they would otherwise not qualify for.
The Cash-Out Refinance Loan. This is a loan of up to 100% of the value of your home. Many people use this to pay for home improvement, for school, or other financial needs.
The Interest Rate Reduction Refinance Loan also called VA IRRRL. This loan is for refinancing a current VA loan.
Energy Efficient Mortgage for improvements.
The Native American Direct Loan. This loan is for Native American Veterans, giving them the same benefits of a regular purchase loan, and the ability to buy, improve or build their homes on Federal Trust Land.
The Funding Fee
This is a fee incurred when taking out a VA home loan. It’s waived for widowed spouses of service members, and for disabled veterans.
Its purpose is to offset the costs to the taxpayer, and it varies based on how much you’re borrowing. You can either pay it up front in cash or pay it off as part of the loan.
There are numerous benefits to choosing a VA home loan over other loans, including:
Assistance if you’re struggling with payments -financial help, and counseling
No early-pay fees -unlike other lenders, there are no penalties for paying off your loan early
Cash-Out Refinancing -a variation on the purchase loan, this allows you to turn a non-VA home loan into a VA loan and covers up to the full 100% home value
Closing costs -the VA limits the closing cost amounts and allows you to negotiate to have the costs covered by the seller
No PMI cost. We said it earlier, but this really is a great benefit so we’re saying it again!
Energy Efficient Mortgage -This VA mortgage option allows you to add up to $6,000 for energy efficient improvements to your house. A lot of folks have additional questions about this option and what improvements qualify. It’s for things like windows, insulation, water heater, weather stripping, and furnace efficiency improvements are a few options.
How Many Homes?
Another great benefit is that the VA home loan can be used more than once! You do have to meet certain requirements though. If you’ve paid off your loan and sold the house, then the slate is wiped clean and you can start all over again (maybe you should even bookmark this article for the occasion)
Need a Little More?
In short, the VA home loan is a great option for veterans or serving force members, so be sure to check it out if you think you’re eligible! The best way to begin your research is to contact me for a free Mortgage Strategy Session.